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Stock-Based Compensation
12 Months Ended
Dec. 31, 2023
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation

Note 16 - Stock-Based Compensation

Description of the Plan

On May 6, 2020, the Company's shareholders approved the 2020 Equity and Incentive Compensation Plan ("2020 Plan"), which replaced the previously approved Amended and Restated 2014 Equity and Incentive Compensation Plan ("2014 Plan"). The 2020 Plan authorizes the Compensation Committee to provide cash awards and equity-based compensation in the form of stock options, stock appreciation rights, restricted shares, restricted share units, performance shares, performance units, dividend equivalents, and certain other awards for the primary purpose of providing our employees, officers and directors incentives and rewards for service and/or performance. Subject to adjustment as described in the 2020 Plan, and subject to the 2020 Plan share counting rules, a total of 2.0 million common shares of the Company are available for awards granted under the 2020 Plan (plus shares subject to awards granted under the 2020 Plan or the 2014 Plan that are canceled or forfeited, expire, are settled for cash, or are unearned to the extent of such cancellation, forfeiture, expiration, cash settlement or unearned amount, as further described in the 2020 Plan). These shares may be shares of original issuance or treasury shares, or a combination of both. The aggregate number of shares available under the 2020 Plan will generally be reduced by one common share for every one share subject to an award granted under the 2020 Plan. The 2020 Plan also provides that, subject to adjustment as described in the 2020 Plan: (1) the aggregate number of common shares actually issued or transferred upon the exercise of incentive stock options will not exceed 2.0 million common shares; and (2) no non-employee director of the Company will be granted, in any period of one calendar year, compensation for such service having an aggregate maximum value (measured at the grant date as applicable, and calculating the value of any awards based on the grant date fair value for financial reporting purposes) in excess of $0.5 million.

On May 5, 2021, shareholders approved the Amended and Restated 2020 Equity and Incentive Compensation Plan (the “Amended 2020 Plan”), which amended and restated the 2020 plan. In general, the Amended 2020 Plan modified the 2020 Plan to (1) increase the number of common shares, without par value, of the Company available for awards by 2,000,000 shares, (2) correspondingly increase the limit on shares that may be issued or transferred upon the exercise of incentive stock options by 2,000,000 shares, (3) remove the 2020 Plan’s full value award limit of 1.8 million shares and (4) extend the plan term until May 5,

2031. In addition, the Amended 2020 Plan made certain other conforming, clarifying or non-substantive changes to the terms of the 2020 Plan to implement the Amended 2020 Plan but did not make other material changes to the 2020 Plan.

Stock Options

There were no stock options granted during the years ended December 31, 2023, 2022 and 2021.

The following summarizes the Company's stock option activity from January 1, 2023 to December 31, 2023:

 

 

 

Number of
Shares

 

 

Weighted
Average
Exercise
Price

 

 

Weighted
Average
Remaining
Contractual
Term (Years)

 

 

Aggregate
Intrinsic Value
(millions)

 

Outstanding as of December 31, 2022

 

 

1,119,523

 

 

$

18.85

 

 

 

 

 

 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

(291,928

)

 

 

10.11

 

 

 

 

 

 

 

Canceled, forfeited or expired

 

 

(206,245

)

 

 

33.93

 

 

 

 

 

 

 

Outstanding as of December 31, 2023

 

 

621,350

 

 

$

17.95

 

 

 

3.5

 

 

$

5.6

 

Options expected to vest

 

 

66,360

 

 

 

5.26

 

 

 

6.2

 

 

 

1.2

 

Options exercisable

 

 

554,990

 

 

$

19.47

 

 

 

3.1

 

 

$

4.4

 

Time-Based Restricted Stock Units

Time-based restricted stock units are issued with the fair value equal to the closing market price of Metallus common shares on the date of grant. These restricted stock units do not have any performance conditions for vesting. Expense is recognized over the service period, adjusted for any forfeitures that occur during the vesting period.

The following summarizes the Company's stock-settled, time-based restricted stock unit activity from January 1, 2023 to December 31, 2023:

 

 

 

Number of
Shares

 

 

Weighted
Average
Grant Date
Fair Value

 

Outstanding as of December 31, 2022

 

 

1,546,002

 

 

$

9.29

 

Granted

 

 

385,959

 

 

 

18.52

 

Vested

 

 

(302,935

)

 

 

11.41

 

Canceled, forfeited or expired

 

 

(9,307

)

 

 

18.19

 

Outstanding as of December 31, 2023

 

 

1,619,719

 

 

$

11.99

 

Performance-Based Restricted Stock Units

Annual grants of performance-based restricted stock units are generally earned (determined under a Compensation Committee approved matrix) based on the Company's relative total shareholder return as compared to an identified peer group of steel companies. The overall vesting period is generally three years, with relative total shareholder return measured for the one, two and three-year periods creating effectively a “nested” 1-year, 2-year, and 3-year performance period. Relative total shareholder return is calculated for each nested performance period by taking the beginning and ending price points based off a 20-trading day average closing stock price as of December 31.

 

 

The following summarizes the Company's stock-settled performance-based restricted stock unit activity from January 1, 2023 to December 31, 2023:

 

 

 

Number of
Shares

 

 

Weighted
Average
Grant Date
Fair Value

 

Outstanding as of December 31, 2022

 

 

968,415

 

 

$

10.21

 

Granted

 

 

211,639

 

 

 

23.13

 

Vested

 

 

(167,694

)

 

 

4.98

 

Canceled, forfeited or expired

 

 

2,298

 

 

 

23.44

 

Outstanding as of December 31, 2023

 

 

1,014,658

 

 

$

13.76

 

Transformation Incentive Grant Program

On December 15, 2023, the Board of approved and authorized a performance-based Transformation Incentive Grant program (the “Transformation Incentive Grant Program”). Under the Transformation Incentive Grant Program, effective December 15, 2023, certain employees of the Company were granted performance-based Restricted Share Unit awards designed to be earned from 0 percent to 200 percent of target levels depending on the degree to which the closing price performance of the Company's common shares satisfies specific average per share closing price goals (achieved if the goal price is met or exceeded by the 20-trading-day average closing price for each trading day in any 20-consecutive-day trading period) during a performance period running from December 1, 2023 through December 31, 2026. Any performance shares earned will pay out in two equal installments in early 2027 and 2028, generally conditioned on continued employment with the Company until the applicable vesting date. Different payout curves apply for each participant group (Tier 1-2 or Tier 3-4).

The following summarizes the Company's Transformation Incentive Grant Program activity from January 1, 2023 to December 31, 2023:

 

 

 

Number of
Shares

 

 

Weighted
Average
Grant Date
Fair Value

 

Outstanding as of December 31, 2022

 

 

 

 

$

 

Granted (Tier 1-2)

 

 

200,000

 

 

 

22.22

 

Granted (Tier 3-4)

 

 

150,000

 

 

 

22.78

 

Canceled, forfeited or expired

 

 

 

 

 

 

Outstanding as of December 31, 2023

 

 

350,000

 

 

$

22.46

 

Other Information

Metallus recognized stock-based compensation expense of $11.5 million, $8.8 million and $7.3 million for the years ended December 31, 2023, 2022 and 2021, respectively.

As of December 31, 2023, future stock-based compensation expense related to the unvested portion of all awards is approximately $19.9 million, which is expected to be recognized over a weighted average period of 2.4 years.